With litigation work in decline, tough competition is forcing London firms to rethink their strategies.
UK shipping firms in Greece are battling against a significant contraction in the volume of litigation work, traditionally the backbone for the Athens-based practices.
Few believe that the decline is merely cyclical, and coupled with intense competition in the ship finance arena, many firms are being forced to offer significantly discounted rates and are increasingly looking to push into alternative areas of practice.
Some resident UK partners even believe that in five years’ time there will be no London law firms practising shipping law in Greece.
The immediate impact of the decline in work, both in ship finance and litigation, has been a strategic shift. This is particularly noticeable in those firms most recently arrived in the region. Thomas Cooper & Stibbard, which set up in Athens five years ago, is looking at introducing a Greek law practice and beefing up its general commercial work, while Constant & Constant, which settled in Piraeus a year ago, has turned to wealth management as a bolt-on to its ship practice.
For finance practices, the biggest problem has been the overcrowding of the single-ship financing market – advising one bank, financing one ship – which has had a devastating effect on rates.
“It’s very difficult to make any money on this,” says one Athens-based partner. “Banks are very competitive. All the Greek firms are doing the work and it’s less profitable than bulk work.”
Holman Fenwick & Willan, for example, has switched its attentions from single-ship finance to concentrate on building a ship project finance practice to pick up potentially lucrative work advising on the financing arrangements, including tax and regulatory matters, of bulk ship orders.
Project, or bulk ship finance, is the one bright spot for the UK’s shipping firms in Greece. Greek banks have only recently followed the lead of the German and British banks already investing in this market and many believe there is a market for further expansion, not least because of the global upturn in bulk ship financings. In addition, Greek shipping families are consolidating in the Far East, the world’s fastest growing ship-building region.
This is at least good news for the larger players in the Greek legal market, with the capacity to cope with the larger projects. Traditionally the leaders in the field have been Watson Farley & Williams and Norton Rose.
Norton Rose is by far the largest English law firm in Greece, with 12 lawyers working on ship finance to Watson Farley’s seven. Chris Hobbs, Norton Rose Greece managing partner, claims: “Our [bulk] ship finance practice has grown hugely and is the best practice in Greece. We’ve been losing some [single-ship finance], but only because of undercutting of costs.”
The problem of rival firms undercutting has become so severe that one partner reports that one particular firm has an hourly rate £400 cheaper than his.
Watson Farley Greece managing partner John Krzywkowski says that this year has been tough: “The market was quiet at the beginning of the year and since the summer has begun to pick up. There’s been more work on the dry litigation side [disputes arising out of charterparties and insurers] although we’ve just picked up a couple of casualties.”
Ironically, it is the success of shipping firms’ clients, the shipowners, that has also put a dent in fee-earning arising from ship litigation. At present, and for reasons no managing partner could give, there has been a massive increase in freight rates – the cost shipowners charge to transport goods.
Many say there has been a rise of between £50,000 and £60,000 a day. With business this good, owners are desperate to settle any disputes quickly.
Other reasons given for the downward spiral in shipping litigation is a tendency for protection and indemnity (P&I) clubs to do far more work in-house, combined with better quality management and improved ship regulation, which means there are fewer collisions. Ships are also getting bigger, leading to fewer casualties, although when collisions do occur, they tend to be more serious.
Another problem is that P&I clubs have cut lawyers’ rates to a level below their London counterparts, who also have been subject to a squeeze on their earnings from the clubs.
In this bloated and intensely competitive market, firms reliant solely on shipping work are struggling to make the numbers add up. One managing partner in Greece said: “I wouldn’t advise any firm joining the Greek market to touch shipping.”
For those stuck with it, there is at least one positive story: next year’s Olympic Games. A number of firms are already advising on an array of matters, including the charterpartying of ships for visitors, with more work in the pipeline.
So for those who can extend their horizons beyond shipping litigation and single-ship financing, there may yet be a future in Greece.
Greek practice: work carried out by UK law firms
Athens office: Dispute resolution, headed by Chris Hobbs (one partner, three assistants); general corporate, property finance, energy, headed by partner Elena Tsohou (one partner, nine assistants).
Piraeus office: Shipping finance and general Greek law work, headed by Dimitri Sofianopoulos (two partners,17 assistants).
Watson Farley & Williams
Piraeus office: Litigation (one partner, two assistants) and ship finance (two partners, five assistants). Led by John Krzywkowski.
Constant & Constant
Piraeus office: Ship litigation, ship finance and wealth management (one partner, five assistants). Headed by Denis Dowling.
Athens office: General commercial and corporate, mainly on Greek law. (one partner, three assistants). Headed by John Reece.
Piraeus office: Shipping litigation (four assistants).
Ince & Co
Piraeus office: Shipping litigation and ship finance (three partners, two assistants). Headed by Stephen Askins.
Holman Fenwick & Willan
Piraeus office: Ship litigation (four partners, three assistants). Headed by Charles Lowe. Ship project finance (one partner, one assistant).
Thomas Cooper Stibbard
Athens office: Shipping litigation (two-thirds of overall work) and banking, commercial work, including ship finance (overall one partner and three assistants). Headed by Athens managing partner Douglas Bateson.
Piraeus office: Ship finance and shipping litigation (one partner, seven assistants). Headed by Piraeus managing partner Nigel Bowen-Morris.
Clyde & Co
Piraeus office: Shipping and insurance (one partner, four fee-earners). Headed by Martin Hall, who is to be joined by a second partner, Russell Rawlings.